Investors looking for stocks in the Utility - Electric Power sector might want to consider either Pampa Energia (PAM) or DTE Energy (DTE). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Pampa Energia and DTE Energy are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. This means that PAM's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
PAM currently has a forward P/E ratio of 8.72, while DTE has a forward P/E of 18.51. We also note that PAM has a PEG ratio of 2.99. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. DTE currently has a PEG ratio of 3.12.
Another notable valuation metric for PAM is its P/B ratio of 1.21. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, DTE has a P/B of 2.41.
These metrics, and several others, help PAM earn a Value grade of B, while DTE has been given a Value grade of C.
PAM stands above DTE thanks to its solid earnings outlook, and based on these valuation figures, we also feel that PAM is the superior value option right now.
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Pampa Energia S.A. (PAM): Free Stock Analysis Report
DTE Energy Company (DTE): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).